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What are your options now?

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Last month, the US House of Representatives passed the HEROES Act, a $ 3 trillion stimulus bill that would include additional relief for those with student loan debt. But it is unlikely to be passed by the Senate in its current form. Several Senate Republicans have publicly stated that they will not support the legislation, including Senate Majority Leader Mitch McConnell (R-Ky).

So what could to be included in the next stimulus bill for student borrowers? And what other options do struggling borrowers have?

Student Loan Debt Relief in the HEROES Act

The HEROES Act that was passed by the House contained several provisions that would provide relief for borrowers from student loans, including student loan forgiveness (although an amendment restricted who could qualify for a loan forgiveness).

The provisions included:

  • $ 10,000 in federal student loan forgiveness for borrowers who are in default, in arrears, or whose loans are deferred due to economic hardship
  • $ 10,000 in private student loan forgiveness for “economically troubled” borrowers
  • An extension of the suspension of payments and interest on federal student loans held by the government until September 2021

But – and this is a big but – there seems little chance that all of this will be included in a further stimulus bill passed by the Senate. Senator McConnell said lawmakers would likely decide by the end of June whether to pass a “fourth and final” stimulus bill in response to the coronavirus pandemic and job losses and the resulting financial instability as a result of the closure of thousands of businesses. But that it will be “tightly designed”. He mentioned the help given to those who are still unemployed, and that there could be additional help for small businesses and for health workers. But it’s unclear to what extent student debt relief could achieve this.

That said, it is still possible to take advantage of the student loan debt relief included in the CARES law, which was enacted in late March. And there are other options for student loan borrowers who are struggling to make their payments.

Student Loan Debt Relief in the CARES Act

If you have a federal student loan, you are probably eligible for relief under the CARES Act. The provisions of the bill generally only apply to direct loans and federal family education loans (FFEL loans) held by the US Department of Education. Neither Perkins loans nor private student loans are covered by the bill. Still, the National Consumer Law Center’s Student Loan Assistance Project estimates that about 9 million federal student loan borrowers have at least one loan covered by the bill.

Student loan borrowers who have qualifying loans enjoy a few benefits under the law:

  1. If you are an eligible federal student loan borrower, you have been automatically placed on forbearance, allowing you to temporarily stop making monthly loan payments (without harming your credit). The suspension of payments began in mid-March and will last until September 30, 2020.
  2. If you qualify but choose to continue making payments, you will be charged 0% interest until the end of September. If you can afford to make payments, this is a great opportunity to pay off your principal and save money overall. “Not only will you stay on track for repayment, but you’ll also pay off your loans faster because interest doesn’t accrue,” says Tim Stobierski, founder of StudentDebtWarriors.com, a resource center for student borrowers.
  3. If your federal student loans are in arrears, the Department of Education will not make collection calls or send letters until September 30. Most importantly, each month during the suspension of collection (until the end of September) will count as one month in which the on-time rehabilitation payment has been made, even if you do not make any payments.
  4. If you have benefited from an income-based repayment plan, the suspended payments are considered eligible payments. And if you are working on the forgiveness of public service loans, you should also have the suspension time factored into your 10 years of qualifying payments.

Other Student Loan Debt Relief Options

If you need extra help or don’t qualify for CARES Student Loan Relief, there are other options. These include:

An income-based repayment plan

If you have federal student loans, you can benefit from a long-term, income-based repayment plan regardless of the CARES provisions. If your income has been negatively affected by the coronavirus pandemic and the ensuing economic recession, contact your student loan manager to recertify your income. This can drastically reduce your federal student loan payments.

Under available income-based repayment plans, any remaining loan balances are forfeited if your federal student loans are not fully repaid by the end of the repayment period, which is 20 or 25 years, depending on the plan. . If you make payments through an income-based repayment plan and are also working on a loan forgiveness under the Public Service Loan forgiveness program (PSLF), you can get a discount on any balance of loan after only 10 years of qualifying payments.

Suspend private student loan payments

Private student loans were not included in the provisions of the CARES Act, but some states have since worked with private lenders to provide student debt relief to borrowers. By early June, California, Colorado, Connecticut, Illinois, Massachusetts, New Jersey, Vermont, Virginia, Washington, New York, and the District of Columbia all had deals with lenders to help borrowers. with private university loans and commercially held FFELP loans. The agreement calls on lenders and loan managers to:

  • Offer borrowers the right to suspend forbearance payments for 90 days. You will likely need to call your loan officer to request a forbearance. Make sure to ask that your interest is not accrued during this period, so that you don’t have to pay more after the period ends.
  • Waive late payment fees. While your loan is in arrears, you shouldn’t have to worry about paying late fees on missed payments.
  • Do not issue any negative account reports to the credit bureaus. During forbearance, the agreement states that loan managers must report your account in good standing to the credit bureaus. It’s still a good idea to check. Fortunately, the three major credit bureaus — Equifax

    EFX
    , Experian and TransUnion

    UTR
    – now offer free online weekly credit reports.
  • Stay debt collection proceedings for 90 days. This applies to any new trial.

Explore flexible student loan repayment options

If your student loans are private or not eligible for relief under the CARES Act, you can still negotiate lower payments or even a break in payments.

If you lost your job or saw your income decline during this pandemic, call your private student loan department to see what flexible student loan repayment options are available. Even if you don’t live in one of the states that have agreements with private lenders and loan services, you can still temporarily suspend your private student loan payments without incurring late fees or negative consequences on your loan. your credit report.

Student loan refinancing

By refinancing your student loans, you could reduce the interest rate you pay and save hundreds (if not thousands) on your student debt over time. Interest rates are particularly low right now with variable rates as low as 1.99%, as of June 6, 2020, according to Student Loan Hero, which is part of LendingTree.

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. To benefit from the best rates, you will generally need a FICO credit score of at least 600.

If you are refinancing private loans, this can be a great opportunity to reduce your monthly payments and the total amount you are paying over time. You can also consolidate loans into one payment. If you are considering refinancing federal loans from a private lender, keep in mind that your loans will no longer have access to federal programs and protections, including the CARES Act loan relief and forgiveness programs. . It is therefore important to weigh the pros and cons.

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